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What does "Bad Faith" Mean in the LTD Insurance Policy?

LTD stands for long term disability. All employees have this LTD insurance policy covered which protects them if they become disabled due to unforeseen circumstances and are unable to continue their job. The long term disability policy is an agreement where the obligations and the rights of both the insurer and the insured person are outlined. Different LTD policies done from different companies differ in their terms and conditions and offer different perks. The procedure that must be followed to obtain the policy is also different for different companies. 

It is the duty of the disabled person or the insured to cooperate and discuss openly and honestly about his present condition, treatments, and work details. He should convey every possible detail about his issue to the insurer. On the opposite side, the insurer is supposed to consider every statement and evidence and facts presented by the insured and make a justified, reasonable, and fair decision about the obtainment of the disability policy. 

If under certain conditions, the insurer fails to fulfill its obligations, as per the conditions of the LTD contract, the insured might take legal actions against the insuring company and sue it for breaching the terms of the contract. The insurance company might as well has to compensate for breaching the terms of the agreement. If the incapability of the insurer to provide the client with the benefits has resulted in other foreseeable losses for the client, the insurance company will also have to compensate for such losses. 

However, in such unfortunate cases, the client is entitled to another damage award. This is not based on the terms and conditions mentioned in the contract. 

According to judicial courts, insurance policies and claims fall under a special category of agreement. Unlike other contracts where two sides negotiate and some to a common ground, insurance companies exercise a lot more power and influence than the clients during negotiations, and hence, the terms and coverages that will be provided are modified to a great extent as per their will. 

Not only that, here they policy which is being contracted is special. Here the coverages, which the insurer provides are in return for the premium which it receives from the insured client. 

Because of this special nature of insurance policies, courts have declared that insurance companies should serve their clients with utmost fairness and faith. This relationship should be based on their communication and shouldn't be restricted only to wordings of the agreement. There is a highlighted section of this LTD policy, which says " good faith". It means that the extent of fairness and duty that the insurer is obligated to vary from case to case and not exactly on what the terms of the contract say. Here, the personal communication between both parties is most important because the decision is supposed to based on how well has the insured person explained his case to the insurance company with facts and evidence. 

When insurance companies breach the terms and fail to offer the benefits, the insured person has every right to ask for additional damage compensation from the insurance company more than what they usually provide as compensation. The damages mainly come in the form of punitive damages. There are damages which are meant to punish the defendant for its bad, unfair behaviour and code of conduct. 

Such cases of " bad faith " have occurred several times. They have passed significant judgments on such occasions too. Below given is an instance. 

In 2006, the supreme court passed the judgment during the Fidler vs. Sun Life case that insurance companies are obligated to provide the insured with a psychological benefit. The benefit includes assuring the insured person that he would derive his payments even if he can't work. If the insurance company fails to do so, it becomes an instance of actionable wrong. 

If you are an insured person, claiming your disability benefits, you must seek professional assistance from Pace Law Firm Mississauga. Their experienced services will help you sort any dispute and examine if it's a case of bad faith damage that must be brought to the attention of courts. 


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